Ask a Technical Analyst

[Shoe]

Can you apply the same analysis to commodities (either as a commodity or a traded fund such as SLV)?

[gull]

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Last 5 year average approximately 35% annual return.

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Is this arithmetic?

[kimchi]

What do you use to define the underlying trend? I t sounds like you trade short-term swings over a couple of days or so. I assume you only act on signals that will give you trades in the direction of the longer-term trend.

I'm working on a system using oscillators which search for value in a longer-term trend. ie - buying temporary value in a rising market or selling rallies in a falling market.

I've never seriously looked at candlesticks but I'll dig out one of my old books and look further into it.

I'm currently using MACD to find the longer-term trend, and I'm experimenting with it as an oscillator also. I made a post last week which showed what I believe to have been a top, or at least a temporary top in many global stock markets using MACD-histogram divergences.

This opened up a change of tack which allows me to begin trading only from the short side (selling rallies).

How do you decide which side of the market you're going to take? You can go long, short, or stand aside. Only 2 of those options are allowed at any one time (for me) but I know some sytems (such as using parabolic SAR) are either always long or short, and don't tend to have a bias towards longs during uptrends etc. (unless you add filters).

So, do you filter your candlestick indicators to only take trades with the underlying longer-term trend? I know doing this will miss lots of big reversals, but I also believe it reduces your risk significantly.

[pig4bill]

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I tried daytrading once....once.. in fact I worked at a daytrading firm for about a week to figure out that it wasn't for me. Why grind and go nuts for pennies at a time, when you can make your life easier and pick up the dollars with less stress? Making 200 trades a day isn't fun, and especially with the Nasdaq stocks, there is TA involved, but that game, to be really successful is about learning the market maker and playing against him. People don't realize that it is humans you are playing against, and like poker they have tendencies. So, essentially you have to learn the MM, learn how to fade his tricks, and get in his head because the same patterns do come up in many places. I just hated that pace.

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Nah, daytrading may have been like that 7 or 8 years ago, but not any more. You do 1000 shares a trade, 6 a day, win 4, lose 2, net 25 cents per trade for $500 a day. You don't try to beat the spread, which is impossible anyway with 1 and 2 cent spreads. You play the moves, just like swing trading except smaller.

Another good site for free static charts is bigcharts.com. A great magazine for beginner and expert alike is Technical Analysis of Stocks & Commodities. There are always a couple free systems included, with source code for Tradestation and sometimes Metastock.

[The once and future king]

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The market for the last 5 years has been relatively "easy" to predict/fluke compared to historical precedent

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What has been so easy about the last 5 years that differs from any other random 5 year period?

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Is this a serious question?

[mrbaseball]

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Is this a serious question?

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Yes. I have no idea how the last 5 years have been easier to predict than the next 5 will be or any other 5 period randomly throughout history?

[mrbaseball]

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What's your take on SYNL

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Never step in front of a speeding bus.

[kimchi]

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Is this a serious question?

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Yes. I have no idea how the last 5 years have been easier to predict than the next 5 will be or any other 5 period randomly throughout history?

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For certain trading methologies, the last 5 years have been easier 'predict' maybe because of the clearer defined trends and the relative lack of trading ranges in the global stock markets.

'Predict' would not be the term I'd use. I think 'follow' would be better.

Many trading systems rely on a reasonably strong underlying market trend as a back-drop for making trades. Also, placing long trades in a rising market is more +EV than placing shorts in a falling one, since the upside in a rising market is unlimited, whereas the downside in a bear market is limited to 100%.

Longer-term trend followers have done better following the many big trends in markets pretty much across the board. Trading-range markets produce account-eating whipsaws, but trending markets (especially as long as this current bull) are a dream for many traders.

[mrbaseball]

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For certain trading methologies, the last 5 years have been easier 'predict' maybe because of the clearer defined trends and the relative lack of trading ranges in the global stock markets.


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While that may be true for the last year or two I would argue not so for the entire 5 year period. 2002 was very choppy and volatile as we finally bounced off of the bottom for the current bull run. 2003 was basically straight up. 2004 and 2005 where choppy and whippy with smaller ranges and a slight upward bias. 2006 and 2007 have been strong upmoves with only minor corrections (so far!) which were good for the trend following bull.

If you are looking for a trend following bull scenario however the 1995 to the 2000 top was a far cleaner and straighter run from bottom to top with fewer hiccups.

[john kane]

wow this is incredible. i have just started spreadbetting the markets using the japanese candlestick method (even though i barely understand them, i just know black is bear and white is bullish and about what the lines mean, but not all the different names etc).

i have been using the system on www.britishbulls.com which also runs www.americanbulls.com

they use solely the japanese candlestick method, nothing else.

they tell you when to:

stay long or short for definite the following day

when to watch the stock on that day to see whether to reverse your position from long to short or vice versa.

i'm spreadbetting becuase although the spread is wider i can leverage a vast amount so my $20K i will soon be investing will be worth around $140K.

could you please explain what is wrong with my plan:

each day i will aim to long 5 stocks and short 5 stocks all based on what the british bulls site says. then whenever the market closes and for the following day, the site says that some of them may need to be reversed the following day (the reversal conditions are like if short and it opens higher and stays higher then go long), so i watch those stocks, checking every 30 mins or so, until i feel it is consistent enough to reverse my position.

ideally i will look at being able to put stops or limits down so it does it automatically if i need to reverse.

so say i wake up when market opens, if it is up or down at open, i take put a sensible reversal stop/limit that would be relevant with the stock reversal criteria.

also i will have the amount i put on each stock weighted with beta.

i would be huuuuugggeeeellllyyyy appreciative if you could reply with your thoughts.

fwiw i'm 23, becoming a trainee accountant in mid oct, till then i have $160k of poker winnings saved up, of which i'd like to use $20k to try out this system. i am free all day every day becuase i play online as a semi job.

many thanks if you can give some feedback.